GT Bank 9Months 2020 Result: Braving A Storm, Earnings Up 1.23%

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Saturday, November 21, 2020, /08:00 AM / by Adaeze Nwachukwu, Proshare Research / Header Image Credit: GT Bank


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GT Bank recently posted its 9months 2020 results, recording improved performance across broad financial matrices although growth seems to have slowed amidst tough economic headwinds in 2020 majorly caused by industry and trade dislocations related to the global COVID-19 pandemic; the bank, however, appears to be pushing forward.

 

Key Highlights

  • Gross earnings increased marginally by +1.23%, from N324bn to N328bn in 9months 2020.
  • Profit before tax (PBT) for the group declined by -1.93% from N170.65bn to N167.35bn in 9months 2020
  • Profit after tax (PAT) declined by -3.20% from N167.35bn in 2019 to N146.99bn in the 2020.
  • Total Assets grew by +29.96% from N3.52trn in 9months 2019 to N4.57trn in 9months 2020.
  • Non-performing loan (NPL) ratio for the group was 6.5% it remained unchanged from financial year end (FY) 2019.
  • The capital adequacy ratio (CAR) increased to 23.9% as against 22.5% for FY 2019.
  • Cost-to-income ratio (CIR) increased to 40.2% in 9months 2020 from 36.9% in 9months 2019.
  • The liquidity ratio of the bank fell from 49.3% in 9months 2019 to 38.8% in 9months 2020, although still above the regulatory minimum of 30%.



Profit Edges Ahead Slowly


Profitability

Gross earnings for GT Bank increased marginally by +1.23% year-on-year (Y-o-Y) from N324bn in 9months 2019 to N328bn. A major driver of growth in earnings was a +79.60% advance in interest income. The bank's foreign exchange revaluation gains grew by +74.02% year-on-year (Y-o-Y), while interest expense dropped by -24.90% (see chart 1 below).


Gross earnings of the group declined by -18.45% after translating to US dollar terms, from US$1.06bn in 9months 2019 to US$860.89m in 9months 2020 using the CBN official rate during the different periods. Foreign currency translation cost (cost of the devaluation of the domestic currency) was US$207.79m for the period.

 

 

Chart 1: GT Bank's Gross Earnings 9M 2017 - 9M 2020 (N'bn)

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Source: GTB Financial Statement, Proshare Research


Profit before tax (PBT) for the period declined marginally by -1.93% from N170.65bn to N167.35bn in 9months 2020.  Operating expense increased by +9.92% Y-o-Y while other income increased by +3.46%. Growth in operating expenses was driven by a +235.38% rise in finance costs, AMCON expenses, deposit insurance premiums, and administrative expenses also increased by +11.06%, +31.0%, and +17.27% respectively (see chart 2 below).


 

Translating to US dollar terms, PBT declined by -21.0% from $556.01m in 9months 2019 to $439.24m in 9months 2020 while foreign currency translation cost for the period was US$106.02m as a result of the local currency devaluation.

 

 

Chart 2: GT Bank's Profit Before Tax 9M 2016 - 9M 2020 (N'bn)

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Source: GTB Financial Statement, Proshare Research

 

Impairment charges worsened over the period; the group recorded a +67.35% increase in impairment charges from a loss of N2.76bn recorded in 9months 2019 to a loss of N10.14bn in 9months 2020 (see chart 3 below).

 

Chart 3: GT Bank's Loan Impairment Charges 9M 2016 - 9M 2020 (N'bn)


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Source: GTB Financial Statement, Proshare Research



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Pushing Up Assets; A Yen to Lend


Total Assets

The group's total asset has risen over the past few years, for 9months 2020 total assets grew by +29.96% Y-o-Y, from N3.52bn in 9months 2019 to N4.57bn. The major drivers for the growth in total assets were the derivative financial assets, deferred tax, intangible assets, and total loans and advances, they increased by +291.14%, +67.63%, +21.79%, and +13.87% respectively (see chart 4 below).


Chart 4: GTBank's Total Assets 9M 2016 - 9M 2020 (N'trn)

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Source: GTB Financial Statement, Proshare Research


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Total Shareholders Fund

GT Bank's shareholders fund continued to rise, shareholders fund rose Y-o-Y by +18.66% from N636.75bn in 9months 2019 to N755.55bn. The capital and reserves component of the fund drove the growth by +18.79%, while retained earnings bounced up by +38.16% which was responsible for the growth in the bank's capital and reserves (see chart 5 below).

 

Chart 5: GTBank's Total Shareholders Fund 9M 2016 - 9M 2020 (N'bn)

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Source: GTB Financial Statement, Proshare Research


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Investors' Second Look at The Numbers


Investor Ratio

The Bank posted a decline in its return on equity (ROE) for the period, ROE dropped to 22.15% in 9months 2020 from 26.80% in 9months 2019 (see chart 6 below).


Chart 6: GTBank's Return on Equity (Post Tax) 9M 2016 - 9M 2020

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Source: GTB Financial Statement, Proshare Research

 

Return on assets also declined in 9months 2020 to 3.66% from 4.85% in 9months 2019, the lowest in the last 5 years (see chart 7 below).

 

Chart 7: GTBank's Return on Assets (Post Tax) 9M 2016 - 9M 2020

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Source: GTB Financial Statement, Proshare Research

 

The COVID-19 pandemic put a lot of pressure on Nigeria's banking sector in Both Q2 and Q3 2020, with the sector shrugging off its lethargy in Q3 as the economy restarted after three months of partial lockdown imposed by the federal and state governments which lead to restrictions in business activities and movement.

 

Tier 1 banks such as GT Bank have fairly large loan exposures to the oil and gas sector which has been troubled in 2020 as market conflicts between Russia and China in Q1 2020 were quickly followed by COVID-19-induced demand reversals at the end of the first quarter which was made worse in the second quarter as cases of the coronavirus escalated globally.

 

A second viral wave in Q4 2020 may create further complications for the oil & gas sector and hurt Nigerian banks with large oil & gas loan buckets (see illustration 1 below).


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GT Bank may not be too badly affected by the development but it will take a bit of a knock if local oil sector has an extended period of distress.


 

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